Anaconda Mining Splits Assets to Focus on Canadian Gold

In the interest of promoting growth and looking out for its shareholders, Anaconda Mining had to make a choice. The company had two very different assets ­– an operating gold mine in Newfoundland and iron ore exploration properties in Chile. For a small company, the logistical distance was hard to manage, and when Dustin Angelo stepped in as CEO in September 2010, Anaconda began exploring how it could separate the two assets.

“Our story was difficult to explain,” Angelo explains. “Are we an operating company with a gold mine in Canada or an early exploration company in Chile? Long story short, we ultimately struck a deal to sell our interest in Chile back to our partners and closed the deal in December 2011.”

Getting into gold

The company decided to sell its shares for $4 million – it received $2 million at the December 2011 closing, and Angelo says it will receive another $2 million this May. The company may also earn up to another $7 million contingent upon the properties achieving commercial production and certain sales-related milestones. The Newfoundland property, however, presented the company with a different story.

In 2003, Anaconda entered into a joint venture arrangement to acquire up to 60 percent of the Pine Cove mine on the Baie Verte Peninsula in north central Newfoundland. Before acquiring the other 40 percent in 2011, it upgraded the mill facility to process up to 1,000 tons per day of ore with an 80 to 85 percent recovery rate. However, when Anaconda flipped the switch in September 2010, the mill was recovering only 50 percent, well below its target.

“We struggled from September through to April 2011,” Angelo says. “During that period of time, we worked to stabilize the mill and get the various circuits working to recover the target amount. All circuits – flotation, leaching, filtration and Merrill Crowe – had to be adjusted. In addition, we worked on increasing throughput from 700 tons per day to nearly 1,000 tons per day. The Pine Cove team persevered and turned around the operation.”

Promising production

Now, Anaconda is producing approximately 1,000 ounces of gold per month and expects to produce approximately 1,300 ounces of gold per month by the end of its fiscal year, May 31. Angelo explains that it will further develop its mill optimization program by incorporating more automation into its processes and creating redundancies on critical systems to reduce downtime.

Angelo calls Pine Cove “the little engine that could,” and the team at Pine Cove is sure that now that the right equipment is in place, it can do even more. “With the reserve that we have now, we have a seven- to eight-year mine life,” he says. “But we have never really explored the area. We control 660 hectares and only mine a fraction of the property. We have been unable to explore the rest of our mining license because we have been focused on developing, commissioning and optimizing the current operation. But last year, we drilled an area down dip from where we currently mine that had an intersection of 40 meters of 2.5 grams gold per ton, which is 25 percent greater than our current life of mine grade. It’s a significant discovery for us.”

After making the new discovery, the company contracted a consulting firm to do a structural analysis of the local geology and recommend a broader exploration program. The firm suggested in-fill drilling between the current pit and the new discovery as well as some step out drilling. However, in the interest of being efficient with exploration expenditures, Anaconda opted first to conduct an IP survey over known mineralization to determine the effectiveness of the IP on a larger scale. “The IP survey looks promising, and we are encouraged that we can use that in a more effective way to see where we can find the best targets,” Angelo says. “We also have historical soil sampling and geological surveys for the whole area. We can synthesize this information into a database to refine our drill targets since drilling is very costly.”

In addition to organically growing its resource, Anaconda is looking to expand its property package in the area through leasing. Currently, it is the only company in the area with a producing mill that is ready to take on more. “We are interested in bolting on properties within striking distance of our mill,” Angelo says. “We are in operation and are a likely partner for owners of property in the area who would like to see production from their interests.”

Angelo says expanding its land package achieves two things: It will expand the company’s gold resource and also prolong its mine life. “Our goal is to be a growth vehicle in the gold industry and get Anaconda to a level where it is producing 50,000 to 100,000 ounces of gold a year,” Angelo explains. “However, we won’t get that all through Pine Cove’s current operations. We will grow through acquisition and organically in order to reach this goal.”